Go First gets ₹2000 cr from Wadias to skirt pre-IPO

The ultra-low-cost airline Go First will not pursue the ₹1,500 crore preferential issue of shares—which is planned as a precursor to its initial public offering (IPO)—as the Wadia family has provided around ₹2,000 crore as equity and bridge loan. The Wadia family, which forayed in business as shipbuilders in 1736, infused around ₹550 crore as equity a few months back. It has also raised ₹1,000 crore by pledging securities to provide a bridge loan to Go First.

According to sources, the promoters provided around ₹2,000 crore as cash and non-fund based support besides the bridge loan since the outbreak of Covid-19 in March last year. “In March-May period this year, they have provided around ₹1,500 crore. So, the airline doesn’t need to go for ₹1,500 crore pre-IPO placement of shares. The funding from promoters is enough for it to meet capital requirements till March 2022,” says a highly-placed source on the condition of anonymity.

The no-frills carrier has been rebranded as Go First ahead of its ₹3,600 crore IPO in May. It received market regulator SEBI's approval for its IPO in August. The company is in the process to file Red Herring Prospectus (RHP). It had mentioned the pre-IPO placement of ₹1,500 crore in the draft RHP filed with SEBI.

The bridge loan provided by the promoters will be repaid from the proceeds of IPO, say sources. “The airline has interest-bearing debts of ₹2,200 crore, including the new bridge loan. All these will be cleared using IPO proceeds. The ₹1,500 crore non-fund based debt, which basically letters of credits (LCs) and bank guarantees issued to aircraft lessors, will continue as those are not interest-bearing debt,” says the source. According to the DRHP, the carrier plans to repay dues of over ₹250 crore to Indian Oil Corporation against the fuel purchased.

Not long before the IPO announcement, in March, Jehangir Wadia—the younger son of Wadia Group patriarch Nusli Wadia—had quit the board of the airline. It was soon followed by his resignations from other group companies, including Bombay Dyeing and Manufacturing Co. Ltd, Britannia Industries Ltd and Bombay Burmah Trading Corp. The insiders hinted that the exit was due to his differences with the father.

Signs of differences in the family came to the public first when Go First filed the DRHP. It said the company was exploring legal action against Jeh Wadia, who was the company’s managing director till March, over ownership of the Go Air brand name and other such assets. Jeh Wadia owns Go Air brand through a privately held firm.

The sources say that the airline’s net worth will turn positive—with ₹1,800 crore vis-à-vis negative ₹1,961 crore—after clearing debts post IPO. The debt-equity ratio will be around 1:1. The cost of debt will hardly be 1.5 - 1.8% of expenditure since its non-interest bearing. In the financial year ending March 2020, the airline made a loss of ₹1,270 crore. According to sources, the management has been focused on restricting the losses from multiplying during the pandemic.